Venezuela Pooling Resources In Oil Quest

September 30, 1991|By Gary Marx, Chicago Tribune.

To spur investment, the Venezuelan Congress recently lowered the tax rate to 30 percent from 67 percent for joint ventures in which private companies hold majority ownership. But while petrochemicals have always remained open to foreign capital, many lawmakers are wary of allowing foreign companies to directly exploit Venezuela`s energy resources-something the nation`s constitution prohibits unless Congress determines on a case-by-case basis that it`s in the ``nation`s interest.``

``There is no doubt in my mind that processing heavy crude is in the country`s interest. The constitution left the door open under certain circumstances, and those circumstances have arrived,`` said Jorge Zemella, president of the PDVSA`s strategic associations division.

The first test of the constitutional prohibition is taking place now as Venezuela`s Congress reviews a $3.3 billion natural gas project involving PDVSA, Shell Oil, Exxon and Mitsubishi Oil. The 20-year project, called Cristobal Colon, is expected to be approved in the next several months, but the lengthy and sometimes rancorous review has some Venezuelan officials skittish about their ability to attract foreign capital to heavy crude oil projects, especially with the worldwide competition for foreign capital.

The Soviet Union, Nigeria, Yemen, Indonesia and other oil-producing countries are offering huge financial incentives to attract foreign investment, including access to highly profitable light- and medium-crude oil fields. PDVSA officials say they-and Congress-may allow foreign companies access to high-quality crude, but only after the companies invest several billion dollars to pump and process heavy crude-an investment that will earn no profits for a decade or more.

PDVSA officials argue that Venezuela`s political stability, its geographical proximity to the United States and the potential for future windfall profits will be incentive enough to lure investors. Venezuela has had more than 30 years of uninterrupted democracy, and is only six days` tanker time from the U.S., compared with 30 days from the Middle East.

Five companies, including British Petroleum and Amoco, have signed letters of intent to invest in the heavy-crude projects, and PDVSA is talking with a dozen other major companies, including Chevron, Texaco and Mobil.

But no companies have signed an agreement, and some oil experts are skeptical that Venezuela can lure foreign companies back to the country without granting more financial concessions and offering more guarantees that future investments won`t be nationalized.